Florida Insurance Law Blog : Florida Insurance Lawyer & Attorney : Mark Nation Law Firm : Orlando, Longwood, Gainesville

My client caused a serious accident in which one of the occupants of the other vehicle died.  GEICO insured my client with bodily injury liability limits of $10,000 per person / $20,000 per accident.  The estate for the deceased party agreed that it would accept GEICO's $10,000 limits as full and final settlement of all claims if GEICO agreed to pay them.   

GEICO refused to pay, denied the claim and filed a declaratory judgment action seeking a declaration that there was no coverage under the policy because of an alleged misrepresentation in the presentation of the claim.  The estate for the deceased victim filed a wrongful death lawsuit against GEICO which GEICO agreed to defend under a reservation of rights. 

I rejected the defense under a reservation of rights, and then settled the case with the estate.  

Then, in the declaratory judgment action, I and GEICO filed cross motions for summary judgment on the coverage issue.  The trial court ruled in our favor, finding that GEICO had waived its coverage defenses by failing to comply with Florida's Claims Administration Statute.  I previously wrote on the summary judgment order at http://www.floridainsuranceblog.com/2010/03/articles/claims-administration-statute/geico-waives-coverage-defenses-by-failing-to-comply-with-the-claims-administration-statute/index.html

Yesterday, I filed suit against GEICO for breach of contract and bad faith failure to settle.  The damages being sought in this new lawsuit are the excess judgment damages that resulted from the settlement with the estate. 

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In State Farm Florida Insurance Company v. Seville Place Condominium Association, Inc., ____ So.3d ____ (Fla. 3rd DCA October 14, 2009) a group of condos was damaged by Hurricane Wilma.  Seville submitted the claim to State Farm.  Seville presented an estimate of damage in excess of $4.6 million.  State Farm initially paid a total of $90,564.62 on the claim.  Thereafter, Seville requested appraisal, which State Farm agreed to if Seville would agree to two conditions: 1) that the appraisal award "must be a line item document, broken down by building and unit number, including the pricing that establishes the award of that item;" and 2) that the insured provided State Farm with a proof of loss form. 

In response, Seville filed suit in Circuit Court for breach of the insurance contract, and declaratory relief regarding coverage and State Farm's waiver of policy defenses.  Seville also requested that the court enforce the appraisal provision without State Farm's required conditions. 

The Court ordered the appraisal without State Farm's conditions.  The Court further ordered that the appraisal be completed in 60 days.  State Farm later moved for an additional 60 days.  The Court granted the extra time, and set a final appraisal hearing for June 28, 2008.  The day before that hearing, State Farm filed an emergency motion seeking removal of the neutral umpire previously appointed by the Court.  State Farm later supplemented this motion with a "request for an 'entirely new panel to conduct a new appraisal,' asserting that otherwise it would "require many weeks, months, and possibly even years to sort through the multiple issues related only to this highly problematic and invalid appraisal gone wrong.'"  State Farm's motion was denied.   

Seville's appraiser and the umpire ultimately agreed on a final appraisal award of $2,960,405.  The trial court confirmed the award, and Seville moved to amend its complaint to add claims for bad faith and punitive damages.  State Farm objected, claiming that Seville could not add bad faith an punitive damage claims until there was a "final judgment" and until all of State Farm's appeals were "finally final."  The Court granted the insured's motion to amend.  State Farm sought cert from the 3rd DCA.

The 3rd totally rejected all of State Farm's arguments holding that the final appraisal award was sufficient basis for the commencement of a bad faith claim, and that there is no requirement for an insured to wait until the exhaustion of all appeals before commencing the bad faith and punitive damages claim.  In conclusion, the 3rd stated:

State Farm originally estimated the Association's covered loss at $324,017.  This is less than eleven percent of the amount determined by the appraisal process.  State Farm will have an opportunity to explain this fact, to explain the extraordinary length of time it has taken to resolve the Association's claim, and to defend State Farm's aggressive legal tactics (including the unfounded imposition of conditions on the contractually-stipulated appraisal provision and the last-minute attempt to remove the neutral umpire).  For now, however, we find no basis in this record to quash the orders below as requested by State Farm. 

Ouch. 

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In Citizens Property Insurance Company v. Bertot, ____ So.3d ____ (Fla. 3rd DCA June 3, 2009), an insured homeowner sued Citizens for breach of the insurance policy for failing to pay a claim, and for breach of the covenant of good faith and fair dealing in failing to properly investigate the claim.  Citizens argued that a claim for breach of the covenant of good faith and fair dealing is not cognizable in Florida, and is nothing more than a disguised bad faith claim.  Citizens further argued that if the claim is cognizable, it is premature and must wait until coverage and the extent of damages is determined, just as in a bad faith case.  

The trial court disagreed with Citizens, and allowed the claim to proceed.  Citizens sought certiorari review from the 3rd DCA.  After the petition and response were filed in this case, Citizens advised the 3rd DCA that in another case, the United States Court of Appeals for the Eleventh Circuit certified the questions presented in this case to the Florida Supreme Court.  See, Chalfonte Condo Apartment Assoc. v. QBE Ins. Corp., No. 08-10009, 2009 WL 580775, at *7 (11th Cir. May 9, 2009).  Apparently, Citizens thought that this information would assist them in obtaining relief, but indeed led to their undoing.

In order to obtain certiorari review, the petitioner must show, among other things, that the trial court departed from the essential requirements of the law.  Upon being advised that the 11th Circuit was unsure how to proceed in this situation, the 3rd DCA concluded that the "essential requirements of the law"

are in vigorous flux, with divergent conclusions reached by diligent and experienced federal judges after extensive briefing and analysis of Florida law.  Indeed, the U.S. circuit court of appeals for this circuit has engaged in the judicial equivalent of 'your guess is as good as mine' in certifying the questions to our Supreme Court.  Against that backdrop, we cannot conclude that the trial court's denial of the motion to dismiss was a departure from a settled legal principle.

Thus, the petition was denied. 

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In Allstate Indemnity Insurance Company v. Nelson, ____ So.3d ____  (Fla. 2nd DCA May 22 2009), Nelson was seriously injured in a car accident.  She and Allstate, her UM carrier, agreed to settle the case for her UM policy limits of $250,000.  Allstate tendered the $250,000, but under separate cover, Allstate requested that Nelson execute a release which released all claims, including any claims for bad faith. 

Nelson then filed a three count complaint against Allstate.  In Count I, she sought to enforce the settlement agreement, claiming that she had not agreed to waive any bad faith claims; in Count II Nelson sought additional damages against Allstate over and above the $250,000; and in Count III Nelson sought damages for bad faith.  Nelson also sought discovery of Allstate's claim's file. 

The trial court granted summary judgment to Nelson enforcing the settlement for $250,000, finding that the parties did not contemplate a release of bad faith claims as part of that settlement.  The trial court allowed Counts II (setting the damages for the car accident) and III (bad faith) to continue against Allstate, and granted Nelson's request to produce the claims file.

Allstate sought certiorari review of the discovery order to produce its claims file.  The 2nd DCA ruled that Count III (bad faith) was "premature," and consequently quashed the discovery as to the claims file.  As this appeal only dealt with the discovery issue, the court could not address whether Count III (bad faith) should have been dismissed.  However, given the court's order, I suspect that the bad faith count will be abated pending resolution of the claim setting the amount of damages. 

(The opinion states that this request for the claims file was made as part of the bad faith case.  I query whether some of that same discovery would have been allowed as part of the claim in Count I to enforce the settlement agreement). 

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In West Bend Mutual Insurance Company v. Higgins, _____ So.2d _____ (Fla. 5th DCA March 27, 2009), the insured brought a first-party bad faith case against West Bend pursuant to Florida Statute Section 624.155.  The insured sought discovery of the claims file from the underlying case, including attorney-client material generated in the underlying case. 

The 5th DCA precluded discovery of the attorney-client materials, holding that generally, attorney-client protected documents remain privileged in the first-party bad faith context.  However, the court recognized that there are statutory and implied waivers of the attorney client privilege.  One such implied waiver is a litigants reliance on "advice of counsel" defense which the court stated was not implicated in this appeal. 

Often through thorough questioning of the adjuster, or with a good set of requests for admissions, the attorney for the insured will be able to get the adjuster to admit that he or she did in fact rely on the advice of counsel in making certain decisions in the handling of the case.  It is unclear if that alone will result in a waiver of the privilege.  Clearly, the privilege will be waived if the defendant actually interposes the defense of advice of counsel, or third-parties in its attorneys from the underlying case. 

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Recently, Florida's Fourth District Court of Appeals reversed a First Party Bad Faith verdict and judgment. In United Automobile Insurance Company v. Colon, Ms. Colon sued her PIP insurer for bad faith claims handling in failing to pay her doctors under her PIP policy. Although she disclaimed any non-economic damages for emotional distress, the insured claimed that the carrier's failure to pay PIP benefits caused her problems with doctors who refused to compromise the amount of her bills or render further medical services. However, the insured offered no particular amount of damages related to the problems she had with her providers. The jury returned a general verdict for bad faith damages of $60,000.

The 4th DCA noted that "[i]t has long been accepted in Florida that a party claiming economic losses must produce evidence justifying a definite amount.... Economic damages may not be founded on jury speculation or guesswork and must rest on some reasonable factual basis." The DCA then held that: "As the background shows, plaintiff offered no evidence on which to justify any amount of economic damages resulting from the carrier's bad faith conduct. Because of the lack of such evidence, the carrier is entitled to judgment in its favor on plaintiff's claim for bad faith damages."

While I don't know from the facts of this case whether the plaintiff could have done so, this case points out the necessity to prove up economic damages in a first party bad faith case. Economic damages in a case such as Colon might include impairment of credit which can be proved up by expert testimony. A plaintiff in a first party bad faith action may also be entitled to non-economic damages, even in the absence of economic damages. 

The insurance company's agent is a fiduciary to the insured.  An insured pursuing a first party bad faith claim should always evaluate the propriety of adding a claim for the agent's breach of fiduciary duty.  The elements of a claim for breach of fiduciary duty are: the existence of a fiduciary duty, and the breach of that duty such that it is the proximate cause of the plaintiff's damages.  In Gracey v. Eaker, 837 So. 2d 348, 353 (Fla. 2002)., the Florida Supreme Court held that the victim of a breach of fiduciary duty is entitled to non-economic damages, even in the absence of economic damages.
 

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In Michael Johnson v. GEICO, _____ F. 3rd _____ (11th Cir. March 11, 2009), the 11th Circuit affirmed a summary judgment in favor of GEICO, after its insureds sued for GEICO’s bad faith failure to settle.

On May 24, 2003, Michael Johnson was involved in a fatal accident. The driver of the other car, Woody Staley, Jr., was taken to the hospital from the scene; his passenger died at the scene. Johnson carried bodily injury liability limits of $10,000 per person/ $20,000 per accident with GEICO. Staley carried uninsured motorist limits of $10,000/$20,000, also with GEICO.

Johnson reported the accident to GEICO on May 25, 2003. When Johnson reported the accident to GEICO, he advised GEICO that at least one witness to the accident said that Johnson had run a red light. Johnson said he thought he had a green light, and contested liability.

On May 29, within 5 days of learning of the accident, GEICO’s UM adjuster advised Staley’s attorney that it would tender its Uninsured Motorists limits. (It is unclear from the opinion if this tender is to Staley or the passenger’s estate). On June 3, Staley’s attorney sent a letter to Johnson’s BI adjuster at GEICO requesting certain information within 30 days. Staley’s attorney did not request tender of the BI policy limits.

The accident report did not become available until June 9. The accident report stated that Johnson had run the red light. The accident report assessed Staley’s injuries as “non-incapacitating.” On June 12, 18 days after learning of the accident, GEICO authorized the payment of GEICO’s BI limits to the passenger’s estate.

On June 12, GEICO’s BI adjuster learned that Staley was still in the hospital, in ICU and on a respirator. On June 27, GEICO’s BI adjuster learned that Staley had died. On that date, GEICO authorized its BI adjuster to contact Staley’s attorney and offer the BI limits to settle the case. The adjuster tried to reach Staley’s attorney by phone twice that day with no luck. When the adjuster finally spoke to Staley’s attorney, on July 1, the attorney advised that suit had been filed that day and that tender of the policy limits would not be accepted.

A wrongful death judgment in excess of $2,000,000 was entered against the Johnsons – GEICO’s insureds. Thereafter, Johnson filed suit against GEICO for bad faith failure to negotiate a settlement for GEICO’s policy limits. The trial court determined that in light of GEICO’s quick turnaround between learning of the accident and tender – 33 days – no reasonable jury could conclude that GEICO had committed bad faith.

Johnson argued that given the fact that GEICO immediately tendered its UM limits to Staley (which is excess over the BI limits), and knew of the extent of Staley’s injuries as early as June 12, GEICO should have tendered its limits earlier. The 11th Circuit disagreed, holding that:

After viewing all the evidence in the light most favorable to Insureds, we conclude that insufficient evidence of bad faith was proffered to take this case to a jury. The record shows that liability was contested initially by Johnson. GEICO’s BI adjuster moved quickly to determine liability. Staley’s counsel made a 30-day demand for policy information; GEICO responded in far fewer days. Even though no facts suggested Staley needed immediate funds and no settlement demand was made, GEICO offered the policy limits within that 30-day period and just 33 days of the accident date. In light of the information known to GEICO and the totality of the circumstances, no reasonable jury could find that GEICO breached its duty of good faith.”

With regard to the impact which the resolution of the UM claim had on the BI claim, the Court stated:

the UM claim was a claim based on the insurance contract between Staley and GEICO; the BI claim was based on the insurance contract between Insureds and GEICO. The two contracts and the two claims files were unrelated….The inquiry here is whether GEICO acted reasonably in handling the BI claim in the light of the totality of circumstances.”

A copy of the Johnson opinion in its entirety can be viewed and downloaded by clicking here.
 

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Provident Life and Accident Insurance Company paid our client, Ronnie H., his long term disability benefits from October 2001 until February 2004. Then, as of March 1, 2004, Provident terminated Ronnie’s LTD benefits, claiming he was no longer disabled. Provident terminated Ronnie’s benefits even though the medical records showed that Ronnie’s condition had not improved during this time; quite to the contrary, his physical condition had declined since 2001.

I filed suit against Provident for breach of contract for wrongfully terminating Ronnie’s LTD benefits, and simultaneously filed a Civil Remedy Notice of Insurer Violation (CRN) pursuant to Florida Statute Section 624.155.

Prior to trial, Provident agreed to reinstate Ronnie’s LTD benefits, pay all past due benefits, and pay my attorneys fees and costs. By that time, the CRN had expired, exposing Provident to liability for extracontractual bad faith damages.

As a result of Provident’s conduct in this case, and others, I recently filed a Bad Faith lawsuit against Provident in the United States District Court, for the Middle District of Florida.

This is not the first time Provident’s LTD claims handling procedures have been questioned. We will present evidence in this case showing that in November 2004, Provident entered into a Multi-State Plan of Corrective Action/Regulatory Settlement Agreement with 49 jurisdictions including the State of Florida, as a result of Provident’s improper claims handling procedures for LTD claims. The Multi-State Agreement was the culmination of a lengthy and exhaustive investigation into Provident and its affiliates, Unum Life Insurance Company of America, and The Paul Revere Life Insurance Company’s LTD claims handling procedures. Among other things, the investigation revealed specific areas of concern that Provident:

• improperly relied upon in-house medical professionals;

• unfairly construed attending physician and IME physician reports;

• failed to evaluate the totality of the claimant’s medical conditions;

• placed an inappropriate burden on claimants to justify eligibility for benefits.

All of these were a calculated and systemic business practice by Provident and its affiliates. As a result of the multi-state investigation, in November 2004, Provident, Unum and Paul Revere agreed to reassess claims; modify claims handling and benefit determination practices, establish a specific claim reassessment process, and pay a $15,000,000.00 fine.

In Ronnie’s case, the initial Rule 26 meeting recently took place, and the parties are now providing their initial voluntary disclosures.

One of our experts in the case is a former insider from Provident and its affiliates who will be able to expose Provident’s bad faith claims handling experience.
 

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The issue in this third-party bad faith lawsuit was the propriety of the following jury instruction, given by the trial court:

In your determination of whether GEICO General Insurance Company acted in bad faith in the handling of the Giovo claim against Jack McDonald, Penny McDonald, and Brandi McDonald, any question about the possible outcome of a settlement effort should be resolved in favor of Jack McDonald, Penny McDonald, and Brandi McDonald. GEICO General Insurance Company has the burden to show that there was no realistic possibility of settlement within policy limits.

GEICO General Insurance Company v. McDonald, 2008 WL 4946221 (11th Cir. November 20, 2008).

GEICO objected to this jury instruction, asserting that it was not an accurate statement of the law, and was tantamount to directing a verdict in favor of the bad faith plaintiffs.

The 11th Circuit held:

The district court's jury instruction was not an inaccurate statement of Florida law that misled the jury as it was taken directly from Powell [v. Prudential Property and Casualty Insurance Co., 584 So.2d 12, 14 (Fla. 3d DCA 1991)]. Additionally, we reject GEICO's contention the instruction was tantamount to giving the McDonalds a directed verdict, as the district court correctly instructed that GEICO had the burden of showing there was no possibility of settlement within policy limits. If GEICO had met that burden at trial, the jury could have reasonably found GEICO did not act in bad faith.

GEICO also argued that the trial court should have entered a judgment notwithstanding the verdict because, according to GEICO, the plaintiffs presented “absolutely no evidence of bad faith on the part GEICO….” The 11th Circuit disagreed, holding that:

The evidence showed that although GEICO attempted to settle with Giovo, it did not keep the McDonalds informed of the settlement negotiations. GEICO exposed the McDonalds to a significant excess judgment without the McDonalds' knowledge. GEICO made a counteroffer on Giovo's offer, but represented to the McDonalds it had complied with Giovo's demands. Regardless of whether mere negligence is enough to find bad faith under Florida law, the evidence was legally sufficient to find that GEICO's conduct was more than mere negligence and that GEICO acted in bad faith.

This decision addresses a huge issue in many third-party bad faith cases where the insurer claims that the underlying case could not have settled. This case along with Powell, places a heavy burden on insurers to prove that the underlying case could not have settled, with any question about the possible outcome of a settlement effort to be resolved in favor of the insured.
 

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On September 29, 2008 the Florida Supreme Court issued its opinion in Wachovia Insurance Services, Inc. v. Toomey. The supreme court answered certified questions from the United States Court of Appeals for the 11th Circuit regarding insurance claims, releases, settlements, assignments, and whether a claim for negligence could be brought concurrently with a claim for breach of fiduciary duty.

In Wachovia, former officers sued their company for termination without cause. The applicable insurance policy was due to expire during the litigation, and the company extended coverage for several months to cover potential claims—including the former directors’ breach of employment contract claims. However, in the renewal/extension, the insurance agent/broker allegedly removed coverage for breach of written employment contract claim. As a result, the insured was left without coverage for the very same claims that were the subject of ongoing litigation.

As a result of the employment litigation, a jury awarded the former officers $1.8 million in damages. The company found itself unable to satisfy the judgment, and without insurance for these damages. The former officers and the company entered into a settlement agreement which dismissed certain causes of action against the company, yet expressly reserved claims against the insurance broker. The former officers then filed suit against the broker. The lawsuit included claims for breach of fiduciary duty and negligence, among others.

The opinion addresses three important aspects of claims against insurance companies:

Part 1: Assignment and Immediate Release.

In Wachovia, the former officers and the company entered into a settlement agreement which dismissed claims, yet expressly reserved claims against the insurance broker and assigned causes of action against the broker within the same settlement agreement. The 11th Circuit’s opinion certified a question to the Florida Supreme Court looking for the effect of a settlement agreement between two parties that explicitly contained both an assignment of causes of action and an immediate release.

The supreme court noted that the assignment of a claim against the insurance broker cannot occur after a release or satisfaction of the claim, because once the breach of duty is released or satisfied, the elements of the cause of action can no longer exist. The court noted, however, that nothing prohibits a simultaneous (or, presumably, prior) assignment of a claim with a release or satisfaction of the judgment:

Accordingly, we hold that a settlement agreement reached between two parties that explicitly contains both an assignment of causes of action against a third party [from assignor to assignees] and an immediate release [by assignees of assignor] allows [the assignees] to bring the assigned causes of action against [the insurance broker].

Part 2: Assignment of Breach of Fiduciary Duty Claim.

In Wachovia, the former officers and the company entered into an assignment of claims which included assignment of a breach of fiduciary duty against an insurance broker. The 11th Circuit certified the question whether a claim for breach of fiduciary duty by an insurance broker could be assigned.

The Florida Supreme Court recognized that under Florida law a breach of fiduciary duty is intensely personal due to the nature of the fiduciary relationship of the parties. The court found that to determine whether a cause of action is assignable, the court must not only examine the relationship between the parties, but also must examine the type of duty alleged to have been breached.

In Wachovia, the court found that the fiduciary relationship between a prospective insured and insurance agent/broker was dissimilar from that between an attorney/client because: there were no constraints on insured/broker communications; and insurance brokers could be substituted without prior notice (as opposed to confidential nature of attorney/client communications and the fact an attorney cannot substitute another attorney without the client’s permission). The court held the relationship between the insured and insurance agent/broker was “not so personal and confidential that the cause of action cannot be assigned….”

The court also assessed the alleged duty that was breached. The court referenced its prior decision which held that causes of action based on contract or statute could be assigned, and a cause of action for bad faith (for an insurance agent’s failure to settle a claim in good faith) were assignable. The court distinguished that “purely personal tort claims” could not be assigned under Florida law.

In analyzing Wachovia, the court found the particular ways in which the broker was alleged to breach its duty to its insured was actually a bad faith claim, which Florida courts have held to be assignable. The court ultimately answered the certified question by stating:

Because the insurance broker-insured relationship between [the assignor] and [the insurance broker] was not a confidential relationship, and because the breach of duty claim against [the insurance broker] was essentially a bad faith claim, the cause of action in the instant case is assignable….

Part 3: Separate Causes of Action Permitted for Breach of Fiduciary Duty and Negligence.

In Wachovia, the assignees had brought a claim for the insurance broker’s negligence (an assignable claim under Florida law). The federal district court dismissed the claim prior to trial. The district court ruled that the negligence claim was moot in light of the claim for breach of fiduciary duty—in essence, the damages for the causes of action would be the same, and a finding the defendant did not breach its fiduciary duty would be inconsistent with a finding of negligence.

The issue was not a question which was certified to the supreme court. However, the court referenced its broad latitude to address the determinative, substantive issues of Florida law, and addressed the issue which was raised on cross-appeal.

The Florida Supreme Court properly noted that claims for negligence and breach of fiduciary duty are separate causes of action. The court recognized that insurance agents/brokers will often have both a fiduciary duty to their insureds and a common-law duty to properly procure insurance coverage. The court ultimately held that negligence and breach of fiduciary duty can be pled in the alternative, and that negligence claims against an insurance broker are assignable.

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